Photo: Tesla
For the first time in a long time, Tesla offered no production guidance for 2024 during the Q4 2023 earnings call. Elon Musk warned that Tesla is "between two major growth phases," and the next one won't begin until the global expansion of the next-generation vehicle platform starts. Based on current plans, this might not become obvious until 2026.
Tesla released its financial results for 2023, showing exemplary discipline despite challenging market conditions. The results came close to analysts' expectations, slightly better in some areas and underwhelming in others. Although gross margin (17.6%) shrank from a year earlier as it cut prices, free cash flow remained strong in 2023 at $4.4 billion. Tesla is sitting now on more than $29 billion in cash and equivalents, which is enough to fuel its expansion plans and future model development.
However, investors are more concerned about the 2024 perspective, which is where Tesla may have run out of steam. For the first time, the production capacity (2.35 million units) exceeds the projected sales. Tesla warned investors not to expect a similar sales growth as in 2023, with most optimists expecting less than 2.1 million EVs delivered in 2024. Exiting this stagnation phase is impossible with Tesla's current models, which appear to have reached their limits.
During the earnings call conference, Elon Musk announced that the Model Y is officially the best-selling car in the world, with more than 1.2 million units sold in 2023. However, Musk said that Tesla is now between two major growth phases, which is another way of describing stagnation or even worse. The bad thing is that the second growth phase would not be possible until the next-generation EV production ramps up.
Musk officially confirmed that Tesla's future compact EV, codenamed "Redwood," would start production in the second half of 2025. He also cautioned that ramping production would take longer than usual, so we should not expect visible results earlier than 2026. The redesigned Model 3 and (soon) Model Y should offer these models a new lease on life and keep customers around until Redwood EVs arrive.
The next-generation EVs will be geared toward entry-level segments, with a purchase price projected to be as low as $25,000. To make this possible, Tesla is reimagining not only the design of vehicles but also the design of the manufacturing process. The good news is that Tesla is "very far along" with both these projects. The production of the low-cost EV will start at Giga Texas in late 2025, which Musk said is an optimistic timeline.
Once the new manufacturing techniques are honed, Tesla will move forward with other locations, including Giga Mexico and a third location outside North America. Until these new production lines come online, it would be difficult to see a new growth phase. The good news is that Tesla's other lines of business should make up for the stagnation at its vehicle division. Energy storage, specifically, is projected to far outpace Automotive in 2024.
However, investors are more concerned about the 2024 perspective, which is where Tesla may have run out of steam. For the first time, the production capacity (2.35 million units) exceeds the projected sales. Tesla warned investors not to expect a similar sales growth as in 2023, with most optimists expecting less than 2.1 million EVs delivered in 2024. Exiting this stagnation phase is impossible with Tesla's current models, which appear to have reached their limits.
During the earnings call conference, Elon Musk announced that the Model Y is officially the best-selling car in the world, with more than 1.2 million units sold in 2023. However, Musk said that Tesla is now between two major growth phases, which is another way of describing stagnation or even worse. The bad thing is that the second growth phase would not be possible until the next-generation EV production ramps up.
Musk officially confirmed that Tesla's future compact EV, codenamed "Redwood," would start production in the second half of 2025. He also cautioned that ramping production would take longer than usual, so we should not expect visible results earlier than 2026. The redesigned Model 3 and (soon) Model Y should offer these models a new lease on life and keep customers around until Redwood EVs arrive.
The next-generation EVs will be geared toward entry-level segments, with a purchase price projected to be as low as $25,000. To make this possible, Tesla is reimagining not only the design of vehicles but also the design of the manufacturing process. The good news is that Tesla is "very far along" with both these projects. The production of the low-cost EV will start at Giga Texas in late 2025, which Musk said is an optimistic timeline.
Once the new manufacturing techniques are honed, Tesla will move forward with other locations, including Giga Mexico and a third location outside North America. Until these new production lines come online, it would be difficult to see a new growth phase. The good news is that Tesla's other lines of business should make up for the stagnation at its vehicle division. Energy storage, specifically, is projected to far outpace Automotive in 2024.
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